A manufacturer that switched to making hand sanitiser during the Covid-19 pandemic has lost a court battle against insurer Allianz after its factory burnt down.

Sphere Healthcare failed to comply with its duty of disclosure because it did not flag that it was bringing onto the site bulk ethanol that it could not store safely, the NSW Supreme Court has ruled.

The move would have been relevant to the insurer’s decision to accept the risk, Justice Kelly Rees has found, dismissing the action by Sphere and factory owner Yes Family.

The judge says hand sanitiser was in high demand in 2020, early in the pandemic, and Aunew Group – which had reently acquired therapeutic goods manufacturer Sphere – wanted to start making it.

Sphere ordered 60,000 litres of ethanol, and 304 drums of the fluid were not kept in its dangerous goods storage area but next to the factory, along with pallets of cardboard.

In July 2020, a fire started near the cardboard. The drums limited the fire brigade’s ability to douse the blaze and the factory was lost.

Insurer Allianz refused the manufacturer’s claim when it learnt Sphere was making sanitiser and poorly storing large quantities of ethanol.

Allianz had insured Sphere for several years. In March 2020, Ansin Insurance Brokers WA had arranged a policy with Allianz and stated there was no change in business activity from the manufacture of healthcare and milk powder products.

Aunew then switched broker – to Australasia Insurance Brokers in NSW, which asked Allianz to transfer the cover, causing some confusion but leading Allianz to issue a new policy schedule insuring Sphere and Yes Family for $26.8 million.

Justice Rees says there is no dispute that a contract of insurance came into existence on March 20 2020.

When the policy was transferred to Australasia, the broker used a different policy wording.

Justice Rees says Sphere and Yes Family had a duty to disclose matters to the insurer after March 20 and agrees with Allianz that while premiums and limits were the same, the new wording offered distinctly different cover.

Read the judgment here.